Should You Work With A Financial Professional?

When you make investment decisions, you’ve got a lot of factors to evaluate: corporate earnings, economic climate, interest rates, oil prices and so on.

Navigating the investment world is a daunting task if you’re going it alone. So, make it easier on yourself and get the help you need.

When you work with a financial professional, you become a better investor. Consider a 2004 survey of investors by the research firm of Mathew Greenwald and Associates Inc.

Investors who use a financial professional:

• Are about 50 percent more likely to say they are doing a very good job managing their investments.

• Are more likely to have a plan of action.

• Are less likely to go more than 18 months without “rebalancing” their portfolios (in response to changes in their personal situation or the financial markets).

And there are good reasons behind these results.

A financial professional helps you quantify your goals. You might know that you want to retire at age 60, buy a vacation home and spend your time pursuing hobbies — but do you know how much retirement income you’ll need to attain this lifestyle? And do you know what sort of return you’ll require from your investments to provide you with income?

A financial professional has the tools and expertise to help you answer these questions. If you wanted to explore several different retirement possibilities, your financial professional could illustrate what you’d need to do, and how you’d need to invest.

Once a financial professional is familiar with your needs, risk tolerance and time horizon, they can help customize your investment portfolio. They can help you stay diversified, which is essential to long-term success.

Financial professionals stay current on changing tax laws and investment rules. You might not know that IRA and 401(k) contribution limits went up in 2005.

Clearly, it can be to your advantage to use a financial professional. But how do you find the right one? Here are some questions to ask:

• What are your credentials? Make sure a prospective financial professional has the appropriate securities licenses.

• How do you get paid? Financial professionals get paid through fees or commissions, or a combination of both. One way isn’t necessarily “better” than another, but it’s important for you to know the system of compensation used.

• How will you communicate with me? Find out when you’ll receive statements and how often you’ll meet in person.

• What is your investment philosophy? Different financial professionals have different ways of approaching the investment process. You will need to find someone whose philosophy is a good fit for you.

Finding the right financial professional for your needs can take time — but it’s worth the effort.